Time Preference Fallacy

There is a theory that Bitcoin can lower human time preference.

Value derives from the human perception of utility. A person who trades a car for a horse objectively values the usefulness of owning the horse more than the car. This implies nothing about why one is more valuable to the person than the other, even given exchange. It also implies nothing about the the valuations made by others, or by the same person at any other time. The value placed on one good over another is a preference. The reason for the preference is not provable in rational economic theory. It cannot be shown that a person will express a preference for any property, even his own life.

Time preference is the economic axiom that states people prefer a "present good" over the same "future good". As a conflict with the subjective value, this idea cannot be proven. Time is unique in that it is assumed to have inherent value. Finally, given that value is subjective, it cannot be shown what will change a given person’s time preference. It is, as the name implies, a preference.

Diminishing marginal utility implies that each additional unit of a good accumulated by a person has a lower utility to the person than the previous. This implies that, for a given time preference and interest rate, increased wealth implies a greater willingness to lend. Similarly, a higher interest rate implies a greater willingness for a person of a given time preference to lend. It is a fundamental error to assume that either interest rates or wealth impose any change to time preference. Human preferences can change for any number of reasons, but the actual reasons cannot be proven under given assumptions. Due to its reversal of cause and effect, the theory is invalid. Bitcoin helps people express their preferences, no ability to change them can be shown.

A related theory states that lower time preference is objectively better than higher as it implies greater production. The theory presumes an objective morality. Economics does not make value judgments, it infers their necessary consequence. Aggression differentiates the free market from market intervention, such as by the state. However, even if one accepts nonaggression as the moral divide, no moral distinction between higher and lower time preference exists.

Infinite time preference implies no lending and therefore no production. Zero time preference implies no consumption of what is produced. Given that production exists only to satisfy eventual consumption, zero time preference also implies no production, as there is no value attributable to the consumption of products. So even absent a moral distinction, lowest time preference is not inherently more productive. As such this theory is also invalid.

Wealth is nothing more than the consequence of people satisfying preferences, including those for present and deferred consumption. States employ fiscal and monetary stimulus in an attempt to increase consumption and production respectively, in order to maximize tax revenue. Yet this comes at the cost of taxing both. The outcome is the shifting of capital allocation decisions from the market to the state. This implies people are less able to satisfy preferences. However it implies no change to the preferences that they hold.

It can be enlightening to consider subjectivity in terms of sexual preference.

• { X, Y }
• { X->X, Y->Y }
• { X->X|Y, Y->X|Y }
• { X->Y, Y->X }

One might consider this list ordered in terms of increasing production (i.e. producing more humans). Many states attempt to reduce the expression of these sexual preferences to the set { X->Y, Y->X }. Both outright criminalization of expression and explicit financial incentive for it are employed to this end. This has a discernible impact on expression of sexual preference, but cannot be said to have any impact on the preference itself.

Similarly it should be clear that an increase in production is not objectively good. People doing what they want is the moral good, again assuming the moral principle of nonaggression. Even if we assume all people prefer continuation of the species, this implies no effect on individual sexual preferences.

A related theory states that people can demonstrate lower time preference by hoarding more bitcoin. An increased level of hoarding at the expense of lending implies higher time preference. An increased level of hoarding at the expense of consumption seems to imply a lower time preference, since consumption is deferred. Yet a hoard represents liquidity required for consumption. As a game of chance, any speculation is consumption of the cost of "playing", supported by its required liquidity. The expressed preference is to play the "game", not time. As such this theory is also invalid.